Editorial
Mississippi the Litigation Moocher
by Fred E. Foldvary, Senior EditorGovernment imposes three types of interventions on society. One is fiscal taxation, for revenue. The second is excessively restrictive regulations. The third intervention is excessive law suits.
A "tort" is a wrongful act for which the victim may be compensated with a law suit. In the American tort system, usually the winner of a lawsuit must pay his own legal costs. So if you are falsely accused and get sued and win the case, you must still pay your legal expenses. The state thus imposes a litigation tax on those who are wrongfully sued and win.
A second litigation tax consists of excessive awards to those who initiate law suits. There is often no legal limit to punitive awards, and it can become an "ability to pay" tax. Unlike a fiscal tax such as on property or income, the litigation tax is not uniform, but arbitrary and capricious.
The U.S. State with the highest litigation tax seems to be Mississippi. Massachusetts has been called "Taxachussetts" because of its high taxes, so maybe Mississippi can be nicknamed the "Tort State" and "Tortsissippi" because of its loose and larcenous tort law.
The U.S. Chamber of Commerce has declared that businesses in Mississippi are being unjustly "targeted by a legal system that is gravely tilted toward the interests of plaintiff's lawyers." It claims that Mississippi has the worst legal system in the USA. Since 1995 there have been over 20 verdicts over $9 million, totaling over $2 billion, 8 of them over $100 million. Jefferson County especially has a reputation for overly generous jurors and numerous lawsuits. Since 1999, there have been over 10,000 plaintiffs, while the number of residents is only 9740.
High jury awards are a tax that cuts profits and increases the price of goods. Both the owners of firms and consumers lose, as does the economy generally. If this continues, businesses will avoid investing in the Tortsissippi, and companies will leave the State. Mississippi is a relative poor state, and it will end up that much more mired in poverty.
Trial lawyers are big winners from this litigation, since they get a large chunk of any award. Why does the State government give them this privilege? Trial lawyers are a special interest that provides huge campaign contributions to candidates nation-wide. According to the editorial "Mississippi Burning" in the May 13, 2002 Investor's Business Daily, nearly half of the campaign funds raised by the governor of the State last year came from trial lawyers.
Since the people of the Tort State will be hurt by the loss of business and jobs that will result from the litigation tax, why don't they ask their legislators to reform the system? It is because the structure of voting is dysfunctional. Voters have little incentive to know more about the system, and they are presented with a narrow choice of candidates who are either lawyers or beholden to lawyers for their campaign funds.
Reform will most likely come from the U.S. Supreme Court, not from the voters of the State. One of the victims of the litigation tax might argue that the excessive jury award is a taking of property that violates the 5th Amendment of the U.S. Constitution, or there may be a violation of the 1st Amendment if the State tries to sue the U.S. Chamber of Commerce.
Otherwise, in the advancing technological economies of the 21st century, Mississippi will be a tortoise in the race for prosperity. Its tortious policy is tortuous to enterprise, and the only retort available to contorted business at present is to leave the State. In its greed, though, Tortsissippi may sue international companies that do business in the State, including companies that sell via the Internet. As a moocher on the global economy, it may provoke the World Trade Organization to bring action to stop the restraint on global trade.
But Mississippi is only marginally worse than other U.S. States. The litigation tax is an intervention imposed by all U.S. States, all of them dominated by the trial lawyer interest. The U.S. Congress, also beholden to that interest, will not initiate reforms. Only an overhaul of the voting system and the very structure of government can ultimately remedy the litigation tax along with the regulation tax and the fiscal tax.
Copyright 2002 by Fred E. Foldvary. All rights reserved. No part of this material may be reproduced or transmitted in any form or by any means, electronic or mechanical, which includes but is not limited to facsimile transmission, photocopying, recording, rekeying, or using any information storage or retrieval system, without giving full credit to Fred Foldvary and The Progress Report.
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